Parsec Weekly #71
The institutions actually arrived...
The institutions actually arrived...
For a long time, “the institutions are coming” was more of a hopeful battlecry than a reality for Crypto market participants. However, some very recent news suggests that this could be changing right before our eyes...
A 13F is a form filed quarterly by “institutional investment managers” which lists all equity assets under management. Typically given that the forms become public ~2 months after the filing period, they do not provide much insight as in many cases the positions might have since been disposed of.
Despite this, the most recent set of 13F filings for Q1 exposed some interesting information as it pertains to the types of market participants who have been dabbling in Crypto markets as of late. For the bulk of these participants, Blackrock’s ETF (IBIT) has been the instrument of choice. IBIT boasts the most impressive growth metrics with $16.65bn in AUM, growing from zero just a few months ago.
There are two particular 13F filings which piqued my and the broader market’s interest. The first of which was a monster $1.94bn position reported by Millennium Management. With over $61.1bn AUM, Millenium is a global, multi-strategy hedge fund. While this recent filing led to a lot of excitement on CT, it is impossible to determine whether this is a directional position. Certain derivatives are subject to reporting exemptions so it is very possible that Millenium have been short CME futures and collecting the basis which has been a very attractive trade in Q1. While some of the reported exposure might be directional under some of their quant or trend following strategies, it seems highly likely to me that the bulk of this position would be related to non-directional basis trading, harvesting the yield.
The other, and for me, more insightful 13F filing was the $164m allocation in both IBIT and GBTC by the State of Wisconsin Investment Board (SWIB - the entity responsible for managing assets for Wisconsin state’s pension fund). To give some context on pension funds, they are collectively the largest pool of capital in the world; the SWIB manages $156bn! They are also typically very long term oriented with the average holding period of a stock for a pension fund being 3-4 years so this position is likely to grow over time.
Pension Funds are also known for their intense and lengthy due diligence processes and general aversion to risk. Of course given they are managing public funds, this is for good reason. With this in mind, given the speed of allocation post spot ETF approval, it is likely that this investment decision had been gaining traction for some time internally and the introduction of spot ETFs facilitated the actual allocation of capital. This is a perfect example of the spot ETFs providing real value by facilitating access for participants who could not allocate previously for operational or regulatory reasons.
While the $164m is not a sizeable allocation for SWIB, representing roughly 0.1% of AUM, a public pension fund investing (almost) directly into BTC represents a watershed moment for Crypto. Given what we know about how slowly these pension funds tend to move, this is likely the first of many announcements and 13F filings we will see this year and long into the future:
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